Brent crude was 45 cents lower and traded at $41.34, while the front-month contract in the US crude futures slipped 47 cents at $40.98 a barrel, Reuters reported.
API data reinforced worries that the global oversupply will continue.
According to API, stockpiles in the US increased 8.8 million barrels last week and reached 531.8 million, which was 5.7 million barrels higher than estimates from analysts polled by the news agency.
Investors are watching for official crude inventory data to be released by the US Government to confirm how oil inventories edged up high for a sixth straight week.
ANZ bank told the news agency: "Near-term direction is likely to centre on the degree of increase in US stockpiles."
High production by Iran following the lifting of international sanctions in January 2016 is also adding to the already oversupplied market.
After sanctions were lifted, crude oil exports from Iran increased to 2.2 million barrels per day (bpd).
Major oil producers, including those outside the Organization of the Petroleum Exporting Countries, are set to meet to on 17 April in Doha to discuss a freeze in output at January levels.
Image: Crude inventories in the US increased 8.8 million barrels last week. Photo: courtesy of Michelle Meiklejohn/FreeDigitalPhotos.net.